Senior Housing and Assisted Living

The Ensign Group, Inc. (Nasdaq: ENSG), the parent company of the Ensign(TM) group of skilled nursing, rehabilitative care services, home health, hospice care and assisted living companies, recently reported record results for the first quarter of 2010.  The Ensign Group separately announced the acquisition of two Texas skilled nursing facilities and the operating assets of Horizon Home Health and Hospice, a home health and hospice agency based in Meridian, Idaho.

Financial Highlights Include:

• Adjusted earnings were a record $0.45 per diluted share, up 15.4% over the first quarter of 2009;
• Total revenue was a record $154.2 million, up 18.3% on a consolidated basis;

• Same-store skilled mix increased by 363 basis points to 54.0%;
• The company’s same-store skilled revenue increased by 12.4%, notwithstanding the negative impact of Medicare’s 1.1% net market basket decrease, which took effect on October 1, 2009;
• Consolidated EBITDAR climbed 19.4% to $25.2 million, with consolidated EBITDAR margins of 16.4%; and
• Net income rose 18.0% to $9.3 million for the quarter.

The Ensign Group also announced the acquisition of four long-term care facilities and a home health and hospice business in three separate transactions between January 1, 2010 and May 1, 2010. The real estate and operations were purchased with cash, and include:

• In Idaho, Emmett Care & Rehabilitation Center, a 72-bed skilled nursing facility in Emmett, and Parke View Rehabilitation & Care Center, an 86-bed skilled nursing facility in Burley, on January 1, 2010;
• In Texas, Heritage Gardens Healthcare Center, a 140-bed skilled nursing facility in Carrollton, Texas, and Silver Springs Healthcare Center, a 144-bed skilled nursing facility in Houston, Texas, on May 1, 2010.
• And in Idaho, Horizon Home Health and Hospice, a home health and hospice agency based in Meridian, Idaho, also on May 1, 2010.

Lancaster Pollard recently announced the closing on an $11.7 million financing to build a 63-unit assisted living facility at Tabitha Nursing and Rehabilitation Center in Lincoln, Neb. Tabitha is the first nonprofit to finance new construction under the streamlined HUD LEAN processing system of the Federal Housing Administration’s Section 232 mortgage insurance program for senior living and care providers. Only five such new construction projects have been completed via LEAN processing nationwide.

Tabitha was founded in 1886 and delivers a comprehensive system of rural and urban health care to seniors in a 29-county area of southeast Nebraska. The new facility will be financed with a taxable loan insured by the FHA Section 232 program. It will offer 63 units of memory care and assisted living along with an underground parking garage. This project is part of Tabitha’s larger master plan. As part of the structuring, Lancaster Pollard suggested that smaller projects, including the acquisition of a nearby assisted living facility, nursing home renovations and new Green House construction, be financed with tax-exempt bonds underwritten by Smith Hayes, a local broker-dealer.

“Financing the assisted living facility with FHA mortgage insurance protects Tabitha’s overall credit profile because the debt is non-recourse to the community organization,” said Quintin Harris, Lancaster Pollard vice president, who was the lead banker on the transaction. “As such, Tabitha simultaneously funded other projects working with local investors, keeping community involvement in the project. Further, we estimate that Tabitha will save over $300,000 annually using a FHA-insured funding strategy as compared to a traditional fixed-rate bond issue.” The interest rate on the debt is fixed for the life of the 40-year term.

Sunrise Senior Living, Inc. (NYSE: SRZ) reported financial results for the first quarter of 2010 that showed revenues of $355.2 million in the first quarter of 2010 as compared to $374.7 million for the first quarter of 2009 and its net loss for the first quarter of 2010 was ($16.0) million as compared to net loss of ($18.2) million for the first quarter of 2009.  For the first quarter of 2010, net loss from operations was ($10.6) million, an improvement of $30.4 million as compared to a net loss from operations of ($41.0) million in the first quarter of 2009.  Some of Sunrise’s operational highlights include:

• Comparable community revenues for the first quarter of 2010 increased by 2.4 percent, from $483.7 million for the first quarter of 2009 to $495.3 million for the first quarter of 2010.  Excluding the impact of foreign exchange rates in 2010, comparable community revenues for the first quarter of 2010 increased 1.3 percent to $489.9 million year-over-year.
• Average unit occupancy in comparable communities for the first quarter of 2010 was 86.2 percent, which was down 150 basis points from 87.7 percent for the first quarter of 2009, and down 50 basis points as compared to 86.7 percent in the fourth quarter of 2009. 

• Average daily revenue per occupied unit in comparable communities increased 4.2 percent from $194.99 for the first quarter of 2009 to $203.23 for the first quarter of 2010. Excluding the impact of foreign exchange rates in 2010, average daily revenue per occupied unit for the comparable community portfolio increased 3.1 percent to $201.01 for the first quarter of 2010 as compared to the first quarter of 2009. 
• Comparable community operating expenses for the first quarter of 2010 increased 2.1 percent over the first quarter of 2009 from $358.9 million to $366.5 million. Excluding the foreign exchange rates in 2010, these operating expenses increased 1.0 percent to $362.6 million in the first quarter of 2010.

“In this quarter we continued our operations and balance sheet restructuring efforts to move us toward strengthening our core business results while reducing corporate risk,” said Mark Ordan, Sunrise’s chief executive officer. “Our progress in both areas reinforces our optimism about our future.”

Sunrise continues to express concern over its liquidity position noting that it had $46.5 million of unrestricted cash and no borrowing availability under its credit facility.  As of March 31, 2010, Sunrise had debt of $424.2 million, of which $147.1 million of debt is scheduled to mature in 2010, including $33.4 million under its bank credit facility, which is due in December 2010. Debt that is in default totals $241.3 million, including $187.1 million of debt ($200.4 million face) that is in default as a result of the failure to pay principal and interest to the lenders of Sunrise’s German communities and $25.6 million of U.S. debt that is due to one of our German lenders. Sunrise is seeking waivers with respect to existing defaults to avoid acceleration of these obligations.

Sunrise Senior Living Q1 2010 Conference Call Transcript 

Sunrise Senior Living Q1 2010 Conference Call

Sunrise Senior Living Q1 2010 Earnings Release

Omega Healthcare Investors, Inc. (NYSE:OHI) announced that it has exercised its option to acquire 63 additional long-term care facilities from affiliates of CapitalSource Inc. (“CapitalSource”) for approximately $295 million, consisting of approximately: (i) $34 million in cash to sellers, and (ii) repayment of $261 million of debt at closing.   The 63 facilities represent 6,607 available beds located in 19 states and are part of 30 in-place triple net leases among 18 operators. The 30 leases generate approximately $34 million of annualized revenue.

Omega acquired the option to purchase the 63 facilities in connection with Omega’s previously announced securities purchase agreement with CapitalSource, pursuant to which Omega acquired entities owning 40 facilities on December 22, 2009, and has agreed to acquire 40 other facilities subject to obtaining consent of the U.S. Department of Housing and Urban Development.

Sunrise Senior Living, Inc. (NYSE: SRZ) announced it has completed the previously announced restructure transactions with three of the lenders to its German subsidiaries, Capmark Finance Inc., Natixis, London Branch, and Fortis Bank, UK Branch. Under the restructure transactions, which were first announced in October 2009, such lenders agreed to settle and compromise claims that they may have had against Sunrise with respect to its German subsidiaries.

Sunrise also announced that it has entered into a partial settlement and waiver declaration with Aareal Bank AG, pursuant to which Sunrise will be released from its operating deficit and payment guarantee obligations with respect to loans previously made by Aareal to certain of Sunrise’s German subsidiaries in exchange for, among other things, a cash payment of EUR 2.1 million (approximately $2.8 million).

Sunrise states that it is working to settle and compromise claims that one remaining lender to its German communities may have against Sunrise.

"I am very grateful for the persistent work of my colleagues, our advisors and our banks to accomplish this restructuring," said Mark Ordan, Sunrise’s chief executive officer.

Click here or the full 8-K

Ventas, Inc. (NYSE: VTR) released its results for first quarter 2010 that showed earnings fell to $52.6 million from $74.2 million a year earlier. Normalized Funds From Operations (“FFO”) for the quarter ended March 31, 2010 increased 9.9 percent to $105.2 million, from $95.7 million for the comparable 2009 period.  Average occupancy rates increased to 88.4% from 88.3% and saw the performance on the company’s portfolio of Sunrise Senior Living Properties improve.  Ventas saw a  10.9 percent improvement in NOI which was due to a 4.8 percent increase in average daily rate, a 170 basis point improvement in margin and a ten basis point increase in occupancy.

“Ventas experienced another quarter of strong and growing cash flows, along with continued improving fundamentals in our portfolio of diversified assets,” Ventas Chairman, President and Chief Executive Officer Debra A. Cafaro said. “We intend to use our financial strength and resources to execute our growth and diversification strategy in 2010.”

Ventas Q1 2010 earnings release

Alden Gardens of Bloomingdale, Illinois recently celebrated its official grand opening  with Harris, the Illinois Housing Development Authority (IHDA), National Equity Fund, other project participants and local elected officials more than a year after breaking ground.  The supportive living community for seniors will provide housing for over 80 seniors who are in need of an affordable, assisted lifestyle through Illinois’ Supportive Living Program administered by the Department of Healthcare and Family Services.

To help Alden fill a possible financing gap created by state budget shortfalls, Harris worked with the IHDA to provide a line of credit secured by Medicaid receivables. According to the IHDA and the Affordable Assisted Living Coalition, this is the first time this structure has been used in conjunction with Illinois’ Supportive Living Program.

"In our current economy, we know we need to be flexible and willing to help structure one-of-a-kind financial arrangements," said Katherine Mazzocco, vice president of Community Development, Harris. Harris also provided more traditional financing arrangements, such as credit enhancement for $10.7 million in tax exempt bonds, bond underwriting and remarketing, an interest rate swap, and bond investment.  Other key participants included the IHDA, the National Equity Fund, DuPage County’s Community Development Commission, Federal Home Loan Bank of Chicago, and Enterprise Community Partners, Inc.

"IHDA is proud to have invested more than $13.2 million in tax exempt bonds, interest-free loans and tax credits to help leverage financing for this project," said Gloria L. Materre, Executive Director, IHDA.

Capital Senior Living Corporation (CSU) announced earlier this week that Midwest Portfolio Holdings, LP ("Midwest I"), a joint venture in which CSU held an 11 percent partnership interest, has sold five senior living communities to Health Care REIT, Inc. Upon closing the sale, the CSU leased the communities from HCN.  Capital Senior Living previously managed the five communities in the joint venture under long-term management agreements and the communities being leased in this transaction have approximately 295 units and a combined resident capacity of nearly 390 residents. The portfolio includes four assisted living communities in Nebraska and one assisted living community in Iowa.

"This transaction adds significant top-line growth to the Company, as well as solid cash flow and earnings," commented Lawrence A. Cohen, Chief Executive Officer of the Company. "We can now consolidate the results of operations and benefit fully from further improvement in occupancies, margins and rental rates. These five high quality assets establish an excellent foundation for our new relationship with Health Care REIT, a leading healthcare REIT that invests across the full spectrum of senior housing and health care real estate."

On Friday, the attorneys for Erickson Retirement Communities LLC and its affiliated debtors announced that it has emerged from bankruptcy after the US Bankruptcy Court for the Northern District of Texas confirmed the debtors’ plan of reorganization and sale to Redwood Capital Investments LLC.  The exit from Chapter 11 culminated with Redwood Capital agreeing to purchase all of Erickson’s assets for $365 million after Erickson spent just over six months in the bankruptcy process. The conditions of Redwood Capital’s successful bid required that a consensual plan of reorganization be agreed to by Erickson’s numerous creditors holding in excess of $2 billion of debt no later than April 30, 2010.  Erickson’s organization includes 20 continuing-care retirement communities that serve more than 23,000 residents throughout 11 states.

"It’s highly unusual and remarkable that a complex bankruptcy of this scale was completed in such a tight timeframe," said Thomas Califano, vice chair of DLA Piper’s Restructuring practice. "It was essential that this transaction and reorganization be completed in an expeditious manner to preserve the rights of the residents. The only way this would be done was by aggressively driving the process to a result."

"We pursued an aggressive time schedule designed to capitalize on Erickson’s inherent value in the senior living sector and to avoid a deterioration of Erickson’s business. The expedited auction and reorganization allowed the company to preserve value for all stakeholders and protect the residents interest in their living communities," said John Cusack, Vice-chair of DLA Piper’s Finance practice and Chair of its Real Estate Capital Markets Group. "With financing for the purchase and development of new senior living facilities still generally unavailable to its competitors, Erickson under Redwood Capital’s ownership will find itself in a unique position to grow based on several existing sites that are ready for development and expansion."

Skilled Healthcare Group, Inc. (NYSE: SKH) announced this week that it has entered into a $360 million term loan and a $100 million revolving credit facility that replace the senior secured term loan and revolving credit facility that were set to mature in June 2012. The new revolving credit facility was undrawn at closing.

The new term loan and revolving credit facility will have an interest rate of LIBOR plus 3.75% subject to a LIBOR floor of 1.50%. The commitment fee for the unused portion of the revolving credit facility is 0.50%. The new revolving credit facility matures in April 2015 and the new term loan matures in April 2016.

Boyd Hendrickson, Chairman and CEO, noted, "The new term loan and revolving credit facilities are a positive development for the Company. The refinancing will extend the weighted average maturity of our debt to over five years and, together with the Company’s strong free cash flow, create additional flexibility to fund the Company’s future growth. Our significant real property ownership, which will continue to collateralize the loan, was an important factor in our ability to secure attractive financing terms."